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Not a Happy Christmas

2 December 2005

Not a Happy Christmas

The latest Canterbury Manufacturers' Association Survey of Manufacturers completed during November 2005, shows total sales in October 2005 were down around 15% (export sales down over 23% and domestic sales down just over 3%) on October 2004.

The Canterbury Manufacturers' Association survey sample this month reported around NZ$544m in annualised sales, with an export content of 50%.

"Sales holding up was the last vestige of hope for many, now life is moving from tough to terminal," says John Walley, Chief Executive of the Canterbury Manufacturers' Association. "With the prospect of yet another lift in the OCR, exporters are braced for the worst."

"A month ago the Reserve Bank of New Zealand tightened; since then the pain for exporters increased by 3% and 2% against the US dollar and the Australian dollar respectively. That was 25 points, what happens with 50, more of the same? Or a currency crash that burns, the Belgian dentist and the Japanese housewife whose appetite for New Zealand dollar bonds seems, at this point, limitless."

"At the risk of being characterised as unduly pessimistic, it is hard to find a bright spot in the numbers. The best I could find was the anticipated rate of decline in sales has slowed marginally."

"Sector comments are showing less variability and pessimism is widening across the board, channel stock is not selling through, and the increased order volatility remains in the Australian market."

"Net confidence bounced along the bottom at -32 down from -27 last month, a hard year end in prospect."

"Generally comments reinforce the numbers. Gloom is not a natural state for our respondents but it becomes increasingly difficult to find any silver lining."

"A major concern this month is we missed an opportunity to move with Australia on mandatory Country of Origin labelling (COOL) on food. Such labelling can be the basis of consumer information to support the promotion of buying New Zealand made to New Zealand's consumers, an opportunity lost in several senses."

The current performance index (a combination of profitability and cash flow) stands at 90 from 98 last month, the change index (capacity utilisation, staff levels, orders and inventories) sits at 97 down from 99 last month, the forecast index (investment, sales, profitability and staff) at 95 down from last month at 96. Anything less than 100 indicates a contraction.

"The new Government must deliver new and coherent policies to support productive investment and growth."

"Most of the existing interventions do not work for firms which are based on elaborate transformation, nor do they match what the rest of the developed world is doing in support of their manufacturers - some won't know what we have till it's gone."

Constraints focused on staff ~16%, markets ~79%, capacity ~5%. Capital was not noted as a constraint.

Staff numbers reported a fall in the month of around 0.7% and there are reports that the difficulty in finding skilled staff is easing.


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